M&S: improved performance in Q4
Published:07-April-2009
By Datamonitor staff writer
Marks & Spencer has slowed its sales decline, with UK sales down just 0.3% on Q4 last year, yet it still faces challenging times and more intense competition than ever. In clothing, the retailer's strategy of offering good quality and desirable products at affordable prices must be communicated more effectively in order to win share from competitors.
After a disappointing third quarter, Marks & Spencer (M&S) has improved its performance in the fourth quarter of its fiscal year ending March 2009. In its trading statement for the 13 weeks to March 28, 2009 total group sales were up 1.9%, while UK sales performance was down 0.3%. On a like for like basis, sales were down 4.2%, with general merchandise down 4.8% and food down 3.7%.
Total sales in clothing were down 1.0% on last year, against a third quarter that was down by -6.5%, suggesting a respectable performance. This is particularly valid given the poor weather in February, which will have deterred many of M&S's core older customer base from shopping for clothing, as well as the fact that, Easter did not fall in this quarter, unlike last year.
The retailer's new clothing brand, Portfolio, is also reportedly performing well, overachieving against its own internal targets. However, while this suggests a positive performance, no mention was given of its impact on Classics range, where Verdict believes there is a strong overlap of customers. The real test of the success of the brand is whether it is attracting new customers to the store or persuading existing ones to spend more, rather than simply diverting spend from its existing ranges.
The apparent underperformance of the Per Una brand is also a cause of concern, having been disrupted by changes in management. Per Una is often regarded as the jewel in the M&S brand portfolio and it is vital that the new management brings it back on course to ensure customers' attention is not drawn elsewhere.
The performance in food has improved slightly since the last quarter, with growth of 0.4% on last year. M&S attributed this to increased innovation, better ranging and sharper values, which were highlighted by Wise Buys, Dine In and Family Favourite offers. However, this level of performance is far off the results of M&S's supermarket competitors, with Sainsbury reporting fourth quarter total sales up 6.8% excluding fuel.
Although the fourth quarter clearly represents an improvement in overall performance, the outlook still remains difficult for M&S. Its mid-market positioning in clothing continues to make it one of the brands most at risk during difficult economic times. As value players continue to highlight their positioning to customers, taking full advantage of the economic downturn, M&S needs to make investments in its design content in clothing in order to build a point of difference from the rest of the high street. On the other hand, while M&S intends to make further improvements to its food offer, particularly in innovation, it must continue to focus heavily on offering better value for money if it is to appeal to a broader customer base.
